Article by Jaret Sieberg. Synopsis by Creative Investment Research. Copyright, 1995.
The article discusses a Federal Reserve Board study released late last year that indicated banks do not discriminate against minority applicants. The study, conducted by Federal Reserve Board economist Glenn Canner and Freddie Mac economist James Berkovec, reviewed data from 220,000 FHA mortgage loans made between 1987 and 1989. The study found that blacks defaulted on loans at a higher rate that whites.
While we do not disagree with the data, we disagree with the findings of the study. The data reviewed is very recent data. In addition, the study looked only at loans that defaulted very early in their life. In addition, the use of FHA data only serves to bias the study. Finally, one of the authors, Mr. Berkovec has a conflict of interest which may influence his ability to be objective. If banks are found to be discriminating, his employer, Freddie Mac, would be partially liable.
